Economics

An interesting article arguing that tax cuts do NOT create jobs. The argument uses something simple: math. Now there’s some facts you can’t dispute with.

Steven Landsburg has an interesting libertarian argument saying that if you’re against the health care bill because it forces you to have insurance, then you must also be against social security, because it also forces you to have retirement insurance. For Landsburg though, he wants to get rid of them both.

Sex

Steven Landsburg has collaborated with other smart folks to detect behaviors of Americans to see how many sex partners they had for each sex. Some are predictable (if you’re a church goer, you will have less). Some others really surprised me (e.g., if you’re female and you’ve been punched the face, you’re more likely to have more sex partners, or if you’re male and you’ve been threatened with a gun, you’re more likely to have more sex partners).

Medicine

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About shaunmiller

I am a Ph. D student at Marquette University. The primary purpose of this blog is to get my ideas out there, and then have other people scrutinize, critique, build upon, and systematize beliefs. This blog will sometimes pertain to what I'm learning in my classes, but it will occasionally deal with non-classroom issues that I'm thinking about as well.

5 Responses to Let’s See What’s in the News Today: 12/20/2010

The article by Larry Beinhart on taxation assumed too much. First he assumes that the value of added labor will not violate the law of diminishing returns, and that there is an incentive to expand labor so as to keep profit low. I don’t know if I should take him seriously, I mean this guy is arguing from the standard Keynsian view lets look:
“;ow taxes are an inducement to reduce costs – at whatever cost – and take profits. We currently have low taxes. If the theoretical model above is correct, the result should be high unemployment and high corporate profits. Moreover, profits that are retained. That are not reinvested”
The last sentence should ring some bells, Shaun. Is it true that profits are not re-invested? Do companies have an incentive to lock their money in a vault and never open it again (oh, and this is a non-bank vault because that would be investing)? It has already been proven (Finland and Germany) that a higher individual and corporate savings rate is conducive to better employment rate and more STABLE economic growth. Profits are ALWAYS reinvested either in increasing production (as Larry assumes will only happen if Taxes are high) to take more profit to expand, make strategic purchases, and compete more aggressively via technological innovation.

So, the point is that Larry only proves his theory with math if the assumptions that justify his exposition are true. It has already been shown that his assumptions are not true, so it follows that his math is false. In fact, I would argue that his math is laughable at best -I don’t even think Krugman would have been so myopic.

You ask if profits are not reinvested. I would say it depends on many factors, but if the economy is down, then I would say not really. Profits go to investing, but it also goes back to the self. The point of profit is making money, and that extra money goes into what one desires: a bigger house, more toys, etc. Some of it is saved, but some of it does get reinvested. How much? I actually don’t know. I guess it depends on the business owner.

Do companies have an incentive to lock their money in a vault and never open it again? No, but if there’s a bad economy, they really don’t want to spend money either. This is typical of any person. In a bad economy, you typically want to save. That’s not going to move the economy though.

Thus, I argue against your premise that profits are ALWAYS reinvested.

Not so. All profits are invested. They are not invested if and only if they are locked in a vault. Profits during a bad economy are usually spent on new innovation and put in banks (which is an investment). The spending on personal desires is investing in resource accumulation -and even, as economists have shown- money that is saved acts as an investment that is utilized during situations that exhibit opportunities for greater return on investments (hence, greater average savings per capita, greater GDP per capita.

Oh, and profits going to self act as consumption which from the perspective of resource accumulation is investment.